Treasury yields jump

Benchmark US Treasury yields rose to 2-1/2-week highs on Wednesday after data showing surging consumer price inflation in January bolstered expectations that the Federal Reserve is closer to raising interest rates.
The Labour Department said its Consumer Price Index jumped 0.6 percent last month after gaining 0.3 percent in December. January's increase in the CPI was the largest since February 2013.
"CPI was much higher than expected, both the headline itself as well as the core number," said Mary Ann Hurley, vice president in fixed income trading at D.A. Davidson in Seattle.
Data from the Commerce Department showed that retail sales rose 0.4 percent last month as households bought electronics and a range of other goods.
Benchmark 10-year notes were last down 11/32 in price to yield 2.51 percent. Those yields earlier rose as high as 2.52 percent, the highest since January 27.
"The 10-year over 2.50 (percent) directed some buying and there were some unwinds of some cross-market trades that were going on," said Tom Tucci, head of Treasuries trading at CIBC in New York.
Much of the inflation increase in the CPI data was attributable to a jump in gas prices, which may not prove sustainable, Tucci said.
Wednesday's data came after Fed Chair Janet Yellen adopted a more hawkish tone than expected during testimony to lawmakers in Washington on Tuesday, which raised expectations that the US central bank will hike interest rates in the coming months.
"She definitely seemed to indicate that there were rate hikes coming, and more than one coming," Hurley said.
Traders are pricing in a 27 percent chance of a rate increase at the Fed's March meeting, up from 13 percent on Monday, according to the CME Group's FedWatch Tool.
Goldman Sachs on Wednesday raised its expectations that the Fed will hike rates in the first half of 2017, and J.P. Morgan brought forward its forecast of the next rate increase to May.
Wage growth data in February's jobs report, which will be released a week and a half before the Fed's March meeting, will likely be crucial in deciding whether the US central bank can hikes rates that month.
"The wage component of the jobs number will be highly scrutinised for the potential for the Fed to move," said Tucci.
Treasury prices rallied earlier this month after January's jobs report showed disappointing wage growth.